Financial incentives only go so far: what else should you be considering?
Behind the most successful accountancy firms lies a team that’s motivated, engaged and willing to go above and beyond.
But how do you build this kind of team? What kind of incentives work best?
When we talk about incentives, the first idea that comes to mind is usually financial – a bonus or a pay rise. But financial incentives aren’t always the answer to getting the best from your team. In fact, research shows that they are actually very ineffective at raising standards and increasing productivity.
If you rely on financial incentives as a way to motivate your team, you might need to think again.
There is a caveat to this. With the current cost of living crisis, a bonus or a pay rise may be exactly what motivates your team right now. It shows that you understand how tough things are and that you want to help. That in itself is likely to generate loyalty and commitment. But also bear in mind the rest of this article as the motivators I discuss below are fundamental to each person, not just current circumstances.
And of course, the tough times will come to an end at some point – sooner rather than later!
Everyone wants more money, right? Well, perhaps not everyone but nearly all of us would like more cash in our pockets. So the obvious conclusion is that offering financial incentives to your team is the most effective way to get them to do a better job. But however logical that seems, it simply doesn’t work.
Study after study has shown that focusing on the outcome (the money) inhibits the brain’s ability to think properly. It actually leads to less accuracy and lower-quality work. It can also encourage behaviour that’s detrimental to the business, such as people competing against each other rather than working as a team.
The research shows that financial rewards don’t create lasting motivation or a permanent change in attitude. They just temporarily change what we do.
To motivate your people, you need to understand what’s most important to them.
Broadly speaking, there are three categories of motivation: extrinsic, intrinsic and altruistic.
Talk to your team to identify which category or categories fits them best.
Extrinsic motivation
This includes external rewards such as money, expensive cars, trophies and certificates that demonstrate your success to the outside world. It can be a huge driving force. After all, just think how much pain some people will push themselves through to win a trophy in sport. And extrinsic motivators aren’t just limited to tangibles. For some people they include intangibles such as public praise and recognition.
And yes, I know this contradicts what I said above. Financial incentives can work well for some roles. Roles that include repetitive activities where you’re looking for an increase in speed, quality and accuracy can be easily assessed to measure performance. But if the incentive stops, the effort will too.
Not only that, but such incentives usually produce diminishing results. Unless the incentive continues to increase, they won’t have the impact they once did. Eventually, a person may reach a point at which they don’t need any more and so their effort will reduce – however tempting you make the opportunity to earn more.
Intrinsic motivation
This is driven by a person’s internal desire to achieve and to do a job well (and their reward for doing so is to feel good). Of course, they might still appreciate an external reward, but it should be in recognition of them doing a great job rather than a carrot to try to persuade them to do one.
Altruistic motivation
This is based on a person’s desire to help others, sometimes even at the expense of their own wellbeing. Interestingly, research suggests that this could, to an extent, be underpinned by intrinsic motivation – a feeling of pride, guilt or shame – and/or extrinsic motivation – the desire for others to see and to recognise the good they do. People who fall within this group are more likely to be motivated by you making a donation to a charity than a personal bonus. In fact, this could be particularly effective at the moment if you were to donate to a local food bank, for example.
Of course, it’s most likely that your team will be motivated by a combination of all three categories. Someone who’s intrinsically motivated toward achieving their objectives might still enjoy recognition for doing a great job and be pleased that their company gives back to the community in some way.
This is why it’s crucial to make time to listen to your people and to understand what’s important to them. Think about what would be meaningful to your team.
Here are just a few ideas for incentives:
What else could work for your team?
Shane Lukas, founder of the Accountants KnowHow Club
There are hundreds more ideas, insights and tips to help you develop your accountancy firm on the Accountants KnowHow Club. Whether you're looking to better price your services, attract higher quality clients, provide more value, recruit the right team, build your advisory skills, network effectively or leverage your time and income, the club has got you covered. Find out more now.